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WEEKLY REGIME VERDICT
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BULLISH CAUTION
Posture: Selective — full size on what qualifies, nothing forced
Upgraded from NEUTRAL — DEFENSIVE. Breadth expanded on every
horizon this week and it wasn’t marginal. What holds the verdict
back from BULLISH CLEAR is one index and one calendar.
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THE REASONING
SPY / QQQ STATUS
SPY closed Friday at $773.26, up 0.61% on the day and at the top
of its range, with a textbook Stage 2 stack: price over the 8 EMA
at $761.50, over the 20 SMA at $750.17, over the 50 at $747.19,
over the 200 at $702.97, all rising. Nothing to argue with.
QQQ is the problem. It closed at $723.03, up 1.17%, and price is
above all four averages — but the 20 SMA at $700.34 still sits
BELOW the 50 SMA at $714.57. The July drawdown inverted the
stack and it has not repaired yet. Stage 2 requires 20 over 50
over 200. QQQ does not have it.
The rule is explicit: when SPY and QQQ disagree, the weaker
reading governs. SPY says clear. QQQ says not yet. That single
crossing is the whole difference between BULLISH CAUTION and
BULLISH CLEAR this week.
Worth noting alongside: IWN closed at $225.52 with a clean Stage
2 stack of its own. Small-cap value is participating, which is
not what a narrow tape looks like.
VIX at 14.89, below its 8 EMA, 50 and 200. Compressed.
Key levels to watch:
→ SPY support: $761.50 (8 EMA), then $750.17 (20 SMA)
→ SPY resistance: open air — Friday’s $773.92 high is the marker
→ QQQ support: $714.57 (50 SMA — the level it just reclaimed)
→ QQQ resistance: $740 (the July shelf)
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BREADTH CHECK
LARGE CAP BROAD MARKET
Above 200-day 72.76 (S5TH) 61.31 (MMTH)
Above 50-day 65.60 (S5FI) 61.43 (MMFI)
Above 20-day — 64.12 (MMTW)
New highs / new lows — 2.67 (MAHN/MALN)
Concentration gap: +11.45 pts / +4.17 pts
5-day direction: EXPANDING — sharply
Reference levels — the same on every report:
→ Above 70: extended participation
→ 40–70: normal range
→ Below 40: contracting
→ Below 25: washed out
Verdict: STRONG — with one extended reading
Compare against last Sunday, when this section read MIXED:
31 Jul 7 Aug Change
MMTH 56.14 61.31 +5.2
MMFI 51.67 61.43 +9.8
MMTW 45.18 64.12 +18.9
MAHN/MALN 1.28 2.67 +1.4
S5TH 66.60 72.76 +6.2
S5FI 62.02 65.60 +3.6
Every measure up, and the short end moved most. Short-term
participation went from 45% to 64% in five sessions. That is the
layer breakouts actually need, and last week it was the layer
that was broken.
The concentration gap tells the more interesting story. On the
50-day horizon it collapsed from 10.35 points to 4.17 — the
broad market is catching up to large-cap fast. On the 200-day it
widened to 11.45. Translation: the recovery is real and broad on
the intermediate horizon, but the long-term trend is still owned
disproportionately by the big names.
The one caution flag: S5TH at 72.76 is above the 70 line.
Large-cap participation is extended. That is not a sell signal —
extended readings can persist for weeks — but it does mean the
easy part of this move is behind us, not ahead.
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THE MACRO PICTURE
Three things happened this week and they do not point the same
direction.
THE LABOR MARKET CRACKED
July payrolls came in at −23,000 against an expected +83,000.
Private payrolls actually rose 30,000; the headline was dragged
down by a 53,000 loss in government, concentrated in local
government education. The unemployment rate fell to 4.1% from
4.2%, but for the wrong reason — labour force participation
dropped to 61.4%, a level not seen in over five years. People
leaving the workforce lowers the rate without anyone finding a
job.
The revisions were worse than the print. May was cut by 66,000
and June by 37,000 — 103,000 fewer jobs than previously
reported. Average hourly earnings rose 3.2% over twelve months,
the slowest since May 2021.
THE FED IS LEANING THE OTHER WAY
The FOMC held at 3.50%–3.75% on 29 July, but the vote was 9–3,
and all three dissents wanted a HIKE. Hammack, Kashkari and
Logan have grown vocal about inflation running above target for
more than five years. Chair Kevin Warsh described it as a “good
family fight.”
Markets now price one to two hikes by year-end, not cuts. Read
that against the paragraph above: a deteriorating labour market
and a central bank with a tightening bias is a stagflationary
setup, and it is the single most important macro fact on the
board right now.
Last CPI print (June, released 14 July): headline 3.5% y/y, core
2.6% y/y, with the monthly index falling 0.4% on lower gasoline.
Inflation is easing, but from a high base and not fast enough
for three voting members.
US10Y at 4.649%, sitting just above its 20-day average and in a
rising trend since March. Elevated. A headwind, not a tailwind.
OIL IS THE SWING FACTOR
The Iran conflict is in its sixth month and the Strait of
Hormuz — roughly a fifth of global oil flow — has been largely
closed since March. Brent peaked above $126 in April.
Iran and Oman now have a draft agreement to reopen it: inbound
traffic on the Iranian side, outbound on the Omani side, 60 days
with no transit fees, mine clearing in the median lane within 30
days. Brent fell below $80 on 4 August on that news, then jumped
3.8% to $82.49 on Thursday when Iranian state media published a
draft with restrictive conditions attached.
This is the variable that matters most for the Fed. A functional
reopening is a direct disinflationary impulse and it takes the
September hike off the table. A collapse in the talks puts it
back on, hard. Neither outcome is priced with confidence, which
is why the tape keeps whipsawing on headlines.
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MACRO FLAGS — WEEK AHEAD
→ Monday 10 Aug: No US releases
→ Tuesday 11 Aug: Existing Home Sales (10:00 ET)
→ Wednesday 12 Aug: CPI — July (8:30 ET) — THE EVENT
→ Thursday 13 Aug: PPI — July (8:30 ET)
→ Friday 14 Aug: Retail Sales — July (8:30 ET)
U. Michigan Sentiment, Aug prelim (10:00 ET)
Wednesday is the week. With three FOMC members already voting to
hike and the labour market softening, a hot July core print puts
September firmly in play. A soft one likely ends the hike
conversation for this cycle.
Operationally: Wednesday is a no-new-order session. Anything not
triggered by Tuesday’s close gets cancelled rather than carried
into the print. That leaves Monday, Tuesday, Thursday and Friday
as execution days.
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SECTOR RANKING
Context only — never an access gate. A name qualifies on its own
relative strength and structure, not on its sector’s slope. This
ranking tells you where to look first when you’re short on time.
Ranked on daily RS acceleration vs SPY:
1 XME Metals & Mining +27.89 RS 0.90
2 XLB Materials +8.26 RS 0.98
3 XLV Health Care +5.98 RS 1.09
4 XLF Financials +4.51 RS 1.09
5 XLI Industrials +3.04 RS 1.02
—— SPY benchmark 0.00 RS 1.00
6 XLE Energy −1.43 RS 0.96
7 XLY Cons. Discretionary −1.77 RS 0.97
8 XLK Technology −3.31 RS 1.02
9 XLP Cons. Staples −4.19 RS 0.97
10 XLRE Real Estate −9.34 RS 0.98
11 QQQ Nasdaq 100 −13.92 RS 0.97
12 XLC Comm. Services −17.16 RS 0.91
13 XLU Utilities −36.49 RS 0.94
Only three sectors are both above SPY AND accelerating: Health
Care, Financials, Industrials. Those are the only genuine
leadership readings on the board.
XME has by far the strongest acceleration but sits at 0.90 —
still 10% behind SPY. That is early rotation, not established
leadership. Any name from there has to clear RS 80 on its own to
count, and few will.
XLK is the interesting one. Relative strength 1.02, still ahead
of SPY, but decelerating at −3.31. Technology is stalling, not
breaking. Note that this reverses last week’s reading, which is
exactly why sector rotation is context in this system and never
a filter — a four-day-old slope is not a reason to skip a
qualified chart.
HUNT ORDER FOR THE WEEK
Start with Health Care, Financials and Industrials. Second pass
on Metals & Mining for names that clear RS 80 individually.
Everything else stays in the universe — it just isn’t where I’d
spend the first hour.
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VERDICT RATIONALE
BULLISH CAUTION, and the caution is doing real work.
Breadth is the best it has been in months and it improved on
every horizon at once. SPY is in clean Stage 2. Small-cap value
is participating. Volatility is compressed. Those are the
conditions the system is built for, and after two weeks of
producing almost nothing, that matters.
But three things keep this from being a clear signal. QQQ’s
moving-average stack is still inverted and the framework does
not let SPY vote alone. Large-cap breadth is extended above 70,
meaning we are joining this move late rather than early. And the
macro is genuinely two-sided — a softening labour market against
a Fed with three votes for a hike, with Wednesday’s CPI standing
between us and clarity.
The practical posture: take what qualifies, at full size, and
let the dynamic ceiling do the filtering it is designed to do.
Last week the scanner returned 37 elite-RS names and 32 failed
on the volatility ceiling alone. When a market runs, the ceiling
tightens automatically — that is the system refusing to chase,
not the system malfunctioning.
Do not lower a stop to make a setup pass. Do not skip
Wednesday’s blackout. Do not force a trade because breadth
finally improved.
What invalidates this verdict:
→ MMTW closing back below 50, or the concentration gap on the
50-day widening back past 8 points
→ A hot July core CPI on Wednesday that revives the September
hike, with US10Y breaking decisively above 4.75%
What upgrades it to BULLISH CLEAR:
→ QQQ’s 20 SMA crossing back above its 50 SMA, with price
holding above both
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Trade Tight · Think in R · Focus on Process
— Radu / KISS Trading
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⚠️ Educational only. Not financial advice. Always DYOR.